tv On the Move Bloomberg April 2, 2015 3:00am-4:01am EDT
of borrowed money. as the people's bank of china encourages investment, are traitors flying too close -- traders flying too close to the sun. a lot of folks will be on the u.s. so let's check in with caroline hyde. caroline: it is all about tomorrow and the payroll. the market will be closed. it will be easter holiday for many across europe and asia. there will be some notable openings. today is pretty flat ahead of the data. when a disappointing u.s. data yesterday from a manufacturing point of view and the employment point of view. the ftse 100 moving up. dax open down .1%. flat when looking at the equity market. news out of greece, the lifeline
extended by 700 million euros. managing to keep themselves a float. still money hemorrhaging out of the banks. 28 billion euros has been clawed back. we wonder whether that previous prime minister is extending an olive branch to the man who ousted him. tsipras, will he need his help? euro up .4%. the lark -- largely we see the dollar down. talks continuing in switzerland and still no deal when it comes to iran on the nuclear front. and to unleashing the oil they have at the moment. will it be given to the market? prices still falling. it is all about the united states. the dollar trading down 0.3%.
many wondering what we will see from the payroll. the number to expect is 200 45,000 jobs added in the month of march. -- 245,000 jobs added in the month of march. will it be bad news means good news for traders? if you get poorer economic data from the u.s., are you pushing the can down the road? will it not be till the end of the year when we see janet yellen raising rates? will it give impetus to u.s. equities if we see a disappointing number? all questions will be answered tomorrow. let's have a look at how the debt market is doing. greece is looking concerned at the moment. borrowing costs at 11.81%. we had a flurry of trading
statements coming out here in the u k. mark bolin can claim that closing is improving sales. they surprisingly rise. we thought they would be falling. our first quarter of growth in 15. at last. food going very well at 0.7%. profit also being detected. kp end is up 2%. -- kpn is up 2%. watch the telenet stock as well. kpn up as it is exploring its options. that is basically what analysts and investigators are saying this morning. they're just a little bit below that. they say overall, no change from
the previous outlook for the market. it is still all about the petition. francine: that is how markets are opening this morning let's get the latest on greece. the ecb increased emergency assistance by a smaller amount than last week. the clock is still ticking. we have hans nichols in berlin and mark spencer in athens. hans, how much room to the greek banks have? hans: they are up to 71.8 billion. it was only increased 700 million. you talk about an all of branch, it is very short when you look at some of the pressure these greek banks are under. you totaled it up from back in october. 28 billion in outflows.
others are taking a look. here is what we know one point one billion in new spending this year. about half of that is for a hurting month pension. pension reform has been one of the things going the opposite direction. we have this there and there is more on tax revenue, my colleagues have done a great job of reporting this. 875 million in new taxes or ways to tax offshore accounts. a new lottery scheme. dream lighting of the vat. maybe more out of the vat tax. -- streamlining of the vat. maybe more out of the vat tax. greece is saying there were a lot of good vibes and good mood.
not a lot of concrete things off the european side. the next time everyone is scheduled to meet, april 24. we will see if they have a deal before then. they have big payments coming due. francine: they have this payment to the imf due on april 9. will the greeks be able to make that payment? hans: this was a big back-and-forth yesterday. -- beagle -- der spiegel saying they may delay that payment of 450 million euros. greece tried to pour cold water saying it wasn't accurate and in some cases what had been the previous position and they insist they will make their payment. in some ways, i'm interested in what marcus has to say in athens. francine: thank you so much.
speaking of marcus, let's go straight to him. marcus, what is being said on the ground, will they make this payment to the imf? marcus: the government is adamant that the april 9 payment will be made. what is interested -- interesting, this is a government that struggles to speak with one voice. it has been the case since day one. it is another incident where much time is spent in the government spokesperson is fighting or pulling back on statements others have made.
this is something that creditors from the outside looking at greece would be on that. only not the payment so much per se but the fact that we are still getting all of these contradictions. francine: sometimes it is difficult when you're looking from the outside to understand who is calling the shots. the former prime minister of greece indicated in and interview with bloomberg that he may come to the rescue. what were his caveats? marcus: he existed that he was saying stop messing about. you great on february 20, go ahead and carry them out do what
it takes to keep greece in the euro. we will support you if you have a rebellion. of course, it is hard to gauge -- we're hearing from different voices speeding. -- speaking. there is the threat of the breakup within the faction of the party. francine: thank you so much for that. let's get an investor take. we're joined by stuart richardson. let's start on the premise. you basically think that european equities are little bit overbought. if we focus on european equities, we have had such a big
rally because of qe. does that mean that you worry more than most investors? guest: the impact on financial markets is relatively muted at the moment. because i think we have lived through this process for 2.5 years. we have been near default, bailed out and had to renegotiate. the market is not interested until they get some kind of defining event. that may be a very complacent view that is seemingly what happened. at the moment markets were driven by qe. a huge surge of cash coming in from private and public sources. also because of the potential short-term turnaround. the weaker euro and weaker oil price, this is a decent boost. we have seen a decent boost of japanese growth several quarters ago.
will this be sustainable for europe? our belief is we see two to three quarters better of expected growth. but then the continued lack of reform, these are the currency wars. francine: when you talk about a life-changing event, the market is focusing on qe at the moment and expected growth. when you talk about a life-changing event, is this greece on april night saying we cannot pay the imf what happens to the stock market? guest: you don't fight the ecb until someone says there is an vent taking over the ecb -- and event taking over the ecb. it is a potential event the proper event is whether greece it stays or comes out. francine: your take?
guest: the politicians want them to stay in. even though they say it is more containable that was, greece leaving could open up certain avenues europe does not want to go down. whether greece can maintain the reform program that could stir up domestic issues in greece. at the moment for the next several months it will not be a major issue. francine: do you worry about france? that implies we will see a correction, triggered by -- guest: take a step from europe. if you look at the u.s., we ended qe five months ago and equity markets have made no progress. we've seen a real sharp slowdown. though everyone is talking about the weather, this is centered on the energy sector and the slowdown in capex.
now all major sectors have seen a downgrade from where we are now. this will probably spill into q2. if we get some sort of correction in u.s. equities that forms a headwind for europe and japan and that's why we could see a pullback. it's not just the european reason, it is more the global forces coming out of the u.s. francine: we will take a short break and we will talk about the fed and u.k. policy. interest rate hikes from the fed? guest: we say no. francine: interesting call. up next, full speed ahead to the best-performing major stock market. we are talking china. is it only a matter of time before chinese equities meet gravity? ♪
is what can stop chinese stocks? if you think that is vertical check this out this tracks stocks in china skyrocketing for the first time ever and traders are betting more than a trillion yaun of borrowed money. let's bring back the chief executive. stuart richardson. we look at this chart during the break. when you look at chinese money piling in the chinese stocks, because of the huge growth we are going through. this would either go to interest rates or the stock market. guest: in the short run everyone is a trend follower. with the authorities cutting rates the financial rusher means they will not be holding as much as they would be. it could be some sort of warning
from authorities. they will see continued money going into china or it there are few other places where it can go. we're seeing lines on a number of major cities. the way this chinese psychology works it will be short-term adapts. francine: is this a bubble? fundamentals we do not know. let's not get used to gross at 7% -- growth at 7%. we have that story -- dangerous or not? guest: it could be dangerous whether it is a bubble or not -- francine: staying from that. guest: there are some that have no growth or declining earnings. if you're stock literate, there
are stocks to be had on a long-term basis. is heading toward fairly decent corrections. these markets sponsored by central banks. francine: what do investors need to look out for? is china a risk? in general? are you concerned that investors assume china is growing at 6.5% and could grow less? guest: if you look at the official numbers, china is growing below the official numbers. are they going to slow from 7% to 6% and down to 3.5%? they are. that is quite well understood. is there going to be a risk that they have a hard landing and you need something for policy error? i think china will have a smooth type landing. there will be bumps but a hard landing -- we are not penciling in.
it is not a major risk until we see a policy error. francine: the fed is really the only game in town. and janet yellen with a jobs report tomorrow, you are expecting interest-rate rises? guest: when we look at what she said friday, for the first time she put out this case where because policy has a long lead time they may have to raise rates before they see inflation back at 2%. she is preparing the groundwork here. we have had such a good run of payroll growth. although it has been great there is a sub 200 number out there could even be sub 100. if that happens there will be a june rate rise prop, probably not even a september rate rise. i think the fed will be slower to move then people think.
last year they said they would not have a rate rise by the end of 2014. francine: it is data dependent. guest: i think the data has been coming in much weaker. that weakness will now creep into employment data him up maybe tomorrow or next month. francine: what is your take on u.k. politics? a major debate today. are we looking at pound weakness on the back of a labor -- guest: labor andur and torries are virtually no and neck. if it is that, that will be tough news for the economy because we don't know how progressive they will be. it is a difficult. outcome -- difficult outcome.
francine: iran nuclear talks are due to resume at any moment. our middle east editor joins us. elliott, deal or no deal? they are still talking. elliott: i guess it is slightly less clear than it was yesterday. the fact they are still talking believes they believe they can get 1 -- indicates they believe they can get one. if you want some shreds of optimism to grab hold of, they do seem to be inching toward an agreement. the french prefer the metric system. francois hollande said they are several tens of meters from the arrival of getting a deal but they are often the most difficult. the iranian foreign minister says we're moving presumably in the right direction. the talks have gone on so long
now that according to one u.s. historian this could be the longest talks for any secretary of state since camp david in 1978 between egypt and israel. this could be the longest set of negotiations for a top u.s. diplomat on foreign soil since the end of world war i. for the germans is feeling like hotel california when you can check in any time but you cannot leave. francine: they will have to check out at some point. sounds like a fruitful deal. elliott, our middle east editor covering them throughout the day. still to come, we talk fx. that conversation is coming up after the break. let's look at some of the european equities. this is what the euro 600 is
francine: welcome back to "on the move." we are 30 minutes into the trading day. let's see how things are shaping up. this is the picture for the markets. we are pretty much in the green. the ftse gaining 0.2%. a lot of it is looking ahead to that u.s. jobs report. all eyes on the u.s. and on what janet yellen will do next. let's get to our top stock stories with mark barton. mark: good morning to you. 4.6% higher, they haven't been this high since the second day
of january 2008. we had that sales increase for the first time since 2011. same-store sales in the food division up by 0.7%. kpn shares, the dutch phone company 1.8% higher today. it has received interest from several parties about the acquisition of its belgian mobile phone business. it is exploring all options for the division. shares in kpn this year, 12% higher biggest annual gain since 2006. shares are at their highest since october 2012. btg, a u.k. biotech company. today, it says revenue is slightly higher, and it is in a
good position to deliver organic growth, achieve vision for 2021. btg up by 4.6% today. your today, down by 4%. over the last 12 months up by 41%. three gainers. francine: thank you so much. let's look ahead to the key piece of data from the u.s., the nonfarm payrolls report published tomorrow. 245,000 jobs are expected to be added. that would be down 50,000 from the month before. the unemployment rate in the u.s. is now at 5.5%, but wage growth has been lagging. earnings growth slowed to the lowest level since 2012. some big as nasa's are raising their minimum wages -- big businesses are raising their minimum wages. mcdonald's will pay a dollar more than the minimum wage at corporate restaurants.
that follows a similar announcement from walmart. u.s. wage growth is going in the opposite direction to what we are seeing from unemployment. let's speak to the global markets research hadead at bank global. it seems that janet yellen loves to raise interest rates. she is data dependent. what is she looking at in terms of wage growth? guest: i think if you look back at a normal cycle in terms of when you see labor market recovery after a recession, i would say there's only been a very slight difference in terms of what has happened on this occasion. essentially, we are in the midst of the spare capacity in the labor market closing and essentially wages beginning to lift higher. the mcdonald's story is
certainly one. if you look at the jobs report that is beginning to show voluntary departures from jobs. the only reason somebody what voluntarily leave a job is to go to a higher paying job. that is a good indicator of wages picking up. that is crucial for what the fed do. francine: when are you expecting an interest rate rise? are you not worried about retail sales? derek: again, you have to look at the momentum of the economy. there has been a softening. if you look at consumer confidence, the expectation with that is strongly linked with spending going forward. i think that the gains are there in terms of the pickup because of the gasoline story. once we get into q2, we are
going to see some better economic data. francine: what does it mean for the eurozone? i was expecting parity two weeks ago. you are still expecting parity. derek: there are diverging stories in the market. everybody knows about it. i agree with that. it is two sides, it is what is happening in the united states and the u.s. i think qe can still push negative rates further off the curve in europe. i wouldn't be surprised if the 10-year bond was to turn negative. the supply-demand imbalance particularly in germany, is massive. they have to by about 12 billion per month based on the 26% p. the issuance for the entire year is only a little more than that. that could push yields further
lower in europe. on the u.s. side, just one rate hike this year is more or less priced. if we get the fed going in september like we think, the markets will be pricing in more over the following two meetings. francine: what will it take to reach parity? we were close and investors shied away. i spoke to someone who was talking shop, but what would push us to parity? derek: that divergence story is starting to become evident in the rates. because of the softening of the data, if you took two years of swap spread it is pointing to euro-dollar perhaps going higher. i wouldn't be surprised if you get above 1.10 again. as long as the scenario starts to pan out, yields continue to fall then the story is the other way. what could happen for the euro
is what happened to the u.s. dollar during qe. you have a pickup and data, but improved risk appetite. the slow data from europe is showing that on the fixed income side investors are getting out of europe. francine: are you expecting a possible greek exit? derek: that is not in our forecast for the end of this year. i'm more worried today about the scenario than i was a month ago. francine: so you are modeling it? derek: it is not in the scenario. we are assuming greece remains and we get a resolution that is favorable to the current situation. if i'm wrong, that 98 forecast will quickly look ridiculously high. francine: because people will -- so we are talking 1% or 2%.
let's say that greece were to default. then there will be discussions on whether they can stay in the euro. at that moment, what happens to euro-dollar? derek: my view is that we would see a very substantial drop within a period of 2-3 months. we've just had the reserve data from the imf. what that is showing is capitulation of euro holdings from emerging-market central banks. usually, when the euro folds, you get central banks buying. for the first time ever, we've seen valuation declines matched by constant selling by central banks. there's evidence that central banks are beginning to give up on the euro. if we go into a situation where you are ultimately changing the definition of the single currency, you are going to see
reserve managers question their position. i think there's going to be a big shift out of the euro if greece is to depart. francine: talk to me about sterling. we have the first major debate today. the election just 37 days away. now, if you look at the polls, there is an increasingly likely chance that we may get some kind of labor-national party alliance. what would that mean? derek: i think if you look at the ultimate differences between the two, it is about the speed of getting debt down. in my opinion, they are not a million miles apart from each other. when you look at the options market, it is clear that a risk scenario is being priced in around election time. i think the main fear is that we
get into a situation beyond the election where markets don't know what would happen. we are in for 4-6 weeks where there is no coalition agreement reached and there is pronounced uncertainty. for the cash market, it is a lingering uncertainty. i don't think the market is playing that right now. we have to move closer before we see it in a cash market. ultimately, i wouldn't see a huge difference area -- difference. you could argue less austerity will lift growth and bring the bank of england forward in terms of their first rate increase. francine: fairpoint. talk to me about yen. where do you see it in the next quarter? derek: the corporate inflation survey was released and we essentially had 1, 3, and five-year expectations remaining roughly the same.
that is in a period of time when crude oil has dropped. i would imagine kuroda and the boj would be pretty pleased that inflation expectations have remained broadly unchanged. if the markets can start to see this materializing as something that has got potential legs, expectations may be higher. what we should start to see is retail capital outflows from japan. over the last three months, we've seen investment trust companies in japan purchasing foreign equities on a three-month basis. it is the largest on record. that is going beyond the period of 2007. there is evidence that perhaps households are beginning to take on greater risk. that is a supportive story for dollar-yen to go higher. francine: thank you for all of that. derek help any. still to come, breaking the
dig into the numbers for us. caroline: much better than had been expected. we were expecting things to stabilize when it came down to the nonfood sales. they did better than stabilize. they grew for the first time in 14 straight quarters of declines. light at the end of the tunnel. 0.7% growth in general merchandise. clothing up 0.6%. we are starting to see a turnaround. we are starting to see belinda earl work her magic. it is all about a suede skirt that got particularly good reviews from the fashion press. this is area where they are posting much better progress. the chief executive called it strong progress focusing on quality and styling. that area is doing well, as is the food area. they have been doing much better
than tesco and sainsbury's. they do have a higher price point, a higher quality. that hasn't been hit by the pricing pressure. sales once again rising. we are seeing marks & spencer's protect its profitability. they are on track to meet their targets growing their gross margin in merchandise. food will be up 0.1%-zero .3%. winning in terms of profit and styling. this is a man who has been at the helm since 2010. francine, there were calls for him to be leaving. there was a feeling that he wasn't managing to get a grip of the company. the clothing company was faltering. after 2.3 billion pounds invested in new stores, they managed to have a torrid time in the holiday season, with distribution issues but now may
be the pressure is off. only key area of concern, the cloud, is pretentiously -- potentially international. they have stores in russia and ukraine. they say the economic woes are difficult there. back to you. francine: caroline, thank you. caroline hyde with the latest. now let's talk oil. the headlines have been about the iran negotiations. we want to talk about china. to explain this, bloomberg news editor tim coulter joins us. there is a presumption or expectation that demand from china will peak at a later date than what this report suggests. guest: that's right. when we hear people say things, every once in a while, did i hear that right?
when the biggest refiner says our country is going to peak two years from now, that runs counter to the narratives we hear constantly from the oil companies that we are going to be in the oil business for a long time. if that's right, it is pretty shocking. francine: only two years away. it is literally around the corner. does it mean the chinese economy is weaker? tim: one of the reasons why is, the economy is shifting from the smoke stack-based economy to a more service-based. that is part of it. it is not going to be as industrial. the economy is going to be a lot more efficient. that is a long-term trend that will continue. china's economy is nowhere near as efficient at converting energy into gdp. natural gas the eccles are
starting to make some inroads too. guy:francine: if oil demand is peaking in 2017, that is not priced in. tim: you would think so, but this is something that is going to evolve over a long time. it is not all oil demand. diesel demand peaks in 2017. diesel is really the cornerstone of the economy. it runs trucks, trains, ships. that's the real surprising data. how do you grow the economy without diesel? francine: they are not the only ones that have been intimating this. 6-7 months from now, we will have a better view, is that fair? tim: it could take longer. we will say. the goal -- diesel demand did decline last year. we will keep watching the
the move." in an exclusive interview with bloomberg tv belarus and president alexander lukashenko says his country will make good on its debt obligations. ryan chilcote sat down and asked how he intended to accomplish repayments, given the state of his economy. president lukashenko: everyone thinks that everything is a plus for the lukashenko. ryan: the opposition says that crimea is like a present to you because people are concerned -- forget about lukashenko, we are worried about having a country. president lukashenko: that is cynical. we wouldn't lose our country because of crimea. we would lose because of our own brand of politics. belarus is in a difficult situation.
we want not to lose the country. i am happy that the opposition is thinking this way. by doing so, they demonstrate that they are not to take power in belarus. i'd be delighted if they tried to come to power. if you can't keep the country together, don't take power. don't go after that responsibility. it is cynical to suggest that the situation in crimea and ukraine is positive for me. how could it be? people in belarus have begun to understand stability and peace. belarusians have known for a long while that our state should be stable and peace is the priority.
maybe we will be a bit poorer. we don't have a lot of resources. but we live in a peaceful country where our children and our old people won't be dying from shrapnel and bullets. francine: let's bring in ryan chilcote. he was talking there about russia crimea, and you also had a lengthy conversation about the economy. ryan: absolutely. belarus is in a difficult position. not just do your politically but because of its dependence on russia. it has really been hit by the decline in the price of oil.a lot of the demand for belarus and exports has disappeared. that has investors concerned. will they get their money back? you look at borrowing costs right now, the yield is about 12.5%. relative to the region, that is
better than what the ukrainians are paying, but much worse than what the russians are paying. it gives you a sense of the concerns. at one point, it spiked up to 20% when the president mentioned restructuring. it is a real issue. 12.5% is a lot. francine: he wants to go back to the market. ryan: there is the prospect of a loan. there is the prospect for an imf deal. they want reforms before they give the money. in addition to that, there's the idea of tapping international markets. the real sort of safety is always russia. he has gone to russia. francine: ryan, thank you so much.
guy: diplomats stay put in switzerland as the iran negotiations continue. francine: greece admits a new list to its creditors clarifying economic plans. guy: seven u.k. party leaders get set for a debate for the first and only time. good morning. welcome to "the pulse." we are here in london. i'm guy jo